JAY CHEMICAL INDUSTRIES PRIVATE LIMITED,AHMEDABAD V. PCIT, AHMEDABAD-1, AHMEDABAD

ITA 543/AHD/2025

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The case involves Jay Chemical Industries Pvt. Ltd., which appealed against the order of the Principal Commissioner of Income-Tax, Ahmedabad, concerning the deduction allowed under Section 80G of the Income-Tax Act for donations made as part of its Corporate Social Responsibility (CSR) expenditure mandated by Section 135 of the Companies Act, 2013. The Principal Commissioner set aside the assessment order, claiming it was erroneous and prejudicial to the interests of the Revenue, as a significant portion of the CSR expenditure was claimed as a deduction under Section 80G, which was contested. The Tribunal examined various precedents and found divergent views on the matter, ultimately deciding that the issue was debatable and the Assessing Officer's decision was a plausible view, thus quashing the Principal Commissioner's order.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 772652 (ITAT-AHMEDABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2025
• Appeal Filed By: Assessee
• Order Result: Allowed
• Assessment Year: 2020-2021
• Other Referred Cases: L&T Finance Ltd. v. DCIT, Gujarat State Financial Services Ltd. vs. DCIT, Interglobe Technology Quotient (P.) Ltd. vs. ACIT, Agilent Technologies (International) (P.) Ltd. vs. ACIT/NFAC, Delhi, Gujarat State Fertilizers & Chemicals Ltd. vs. The ACIT
• Laws Referred To: Income-Tax Act, 1961, Companies Act, 2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R. P. RASTOGI
• Assessee Lawyers: NIMIS VAYAWALA
• Keywords: Set aside; Business expenditure; Assessment record
• Section: 263; 80G

Judgement Text

" आयकर अपीलीय अिधकरण, अहमदाबाद \u0011ायपीठ “बी“ ,अहमदाबाद । IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD \u0015ी संजय गग\u001a, \u0011ाियक सद\u001b एवं \u0015ी नरे !साद िस\"ा, लेखा सद\u001b क े सम%। ] ] Before Shri Sanjay Garg, Judicial Member And Shri Narendra Prasad Sinha, Accountant Member आयकर अपील सं /ITA No.543/Ahd/2025 िनधा \u000fरण वष\u000f /Assessment Year : 2020-21 Jay Chemical Industries Private Limited Jay House, Near Panchvati Circle Ambawadi Ahmedabad – 380 006 बनाम/ v/s. The Pr.CIT Ahmedabad-1 Ahmedabad – 380 015 \u0013थायी लेखा सं./PAN: AAACJ 7628 J (अपीलाथ'/ Appellant) (!( यथ'/ Respondent) Assessee by : Shri Nimis Vayawala, AR Revenue by : Shri R.P. Rastogi, CIT-DR सुनवाई की तारीख/Date of Hearing : 05/06/2025 घोषणा की तारीख /Date of Pronouncement: 26/08/2025 आदेश/O R D E R Per Sanjay Garg, Judicial Member: The present appeal preferred by the assessee is against the order of learned Principal Commissioner of Income-Tax-1, Ahmedabad [hereinafter referred to as “Ld. PCIT” for short] dated 07/03/2025 passed in exercise of his revision jurisdiction under Section 263 of the Income-Tax Act, 1961 [hereinafter referred to as \"the Act\" for short] for Assessment Year (AY) 2020- 2021. Printed from counselvise.com ITA No.543/Ahd/2025 Jay Chemical Industries Pvt.Ltd.vs. PCIT, Ahmedabad-1 Astt.Year 2020-21 2 2. The sole issue involved in this appeal is as to whether the Ld.PCIT was justified in exercising his revision jurisdiction u/s.263 of the Act, on an issue where there are divergent views of the Tribunal, one in favour of assessee and the other in favour the Revenue. 3. The PCIT observed from the assessment records that the AO had allowed a deduction of Rs.3,36,70,305/- (being 50% of total donation paid by the assessee of Rs.6,73,40,611/-) u/s.80G of the Income Tax Act, 1961. The PCIT observed that a big portion of Corporate Social Responsibility (CSR) expenditure has been claimed as deduction u/s.80G of the Act, which otherwise was not an allowable expenditure u/s.37 of the Act. He, therefore, held that the AO has committed an error in allowing the aforesaid deduction, which was prejudicial to the interests of Revenue. He, accordingly, set aside the impugned assessment order for de novo assessment on this issue. 4. Being aggrieved of the said order of the Ld.PCIT, the assessee has come in appeal before us. 5. Admittedly, the assessee, in this case, has made donation to eligible institutions as provided under the relevant provisions of section 80G of the Act, however, out of CSR expenditure, which the assessee otherwise was mandatorily liable to incur u/s.135 of the Companies Act, 2013. We note that the issue as to whether the donation made out of the expenditure earmarked and mandated for CSR u/s.135 of the Companies Act, 2013, can be allowed as deduction u/s.80G of the I.T. Act, has come for consideration before various Benches of the Tribunal. The Kolkata Bench of this Tribunal in the case of L&T Finance Ltd. v. DCIT (Judgment dated September 30, 2024), Printed from counselvise.com ITA No.543/Ahd/2025 Jay Chemical Industries Pvt.Ltd.vs. PCIT, Ahmedabad-1 Astt.Year 2020-21 3 reported in [2024] 167 taxmann.com 503 (Kolkata - Trib.) has held that corporate donations made to eligible institutions, even when constituting part of mandated Corporate Social Responsibility (CSR) expenditure, qualify for a deduction under Section 80G of the Income-tax Act, 1961. The Co- ordinate Kolkata Bench, in this respect, observed that while CSR expenditure may be ineligible for deduction under Section 37(1), the distinct provisions of Section 80G allow deductions for donations made to approved institutions, unless explicitly excluded by the Act. That since the donations were made to institutions eligible under Section 80G, and there was no specific legislative restriction barring CSR-related donations from this deduction, hence the same were eligible for deduction, except for contributions to the Swachh Bharat Kosh and Clean Ganga Fund, which were explicitly excluded. Identical view in favour of the assessee on this issue has been taken by the Co-ordinate Ahmedabad Bench of the Tribunal in the case of “Gujarat State Financial Services Ltd. vs. DCIT” [174 Taxmann.com 461 (Ahmedabad-Trib.)] and the Delhi Bench in the case of “Interglobe Technology Quotient (P.) Ltd. vs. ACIT” [163 taxmann.com 542 (Delhi-Trib.)]. 5.1. However, Delhi Bench of the Tribunal in the case of “Agilent Technologies (International) (P.) Ltd. vs. ACIT/NFAC, Delhi” [2024] 160 taxmann.come 238 (Delhi-Trib.) has taken a view on this issue in favour of the Revenue by holding that the CSR expenditure is not an allowable business expenditure u/s.37(1) of the Act, and further that no deduction u/s.80G of the Act, was allowable on such expenditure. Similar view in favour of Revenue has been taken by the Ahmedabad Bench in the case of “Gujarat State Fertilizers & Chemicals Ltd. vs. The ACIT”(supra). Printed from counselvise.com ITA No.543/Ahd/2025 Jay Chemical Industries Pvt.Ltd.vs. PCIT, Ahmedabad-1 Astt.Year 2020-21 4 5.2. So, as noted above, there are divergent views of the Tribunal, i.e. one in favour of the assessee and the other against the assessee and in favour of the Revenue. The view taken by the AO, thus, was one of the plausible views. These are two mandatory conditions for the PCIT to assume revision jurisdiction u/s.263 of the Act, one that the order sought to be revised must be erroneous and secondly, the same should be prejudicial to the interests of Revenue. In this case, the issue is a debatable issue. As per legal position available as on date, two views are possible; one in favour of assessee, the other in favour of the Revenue. Under such circumstances, the view taken by the AO cannot be said to be erroneous. The AO has taken one of the plausible views, therefore, first condition, that the order sought to be revised must be erroneous, is not fulfilled. It has been held, time and again, that on a debatable issue, the PCIT cannot substitute his own views with that of the AO, merely because his views on the issue do not match with the view of the AO. It has been held time and again that if the view taken by the AO is one of the plausible views, then, the exercise of the revision jurisdiction by the PCIT will not be justified. In view of this, the Ld.PCIT has wrongly exercised his revision jurisdiction in this case in setting aside the impugned assessment order. The order passed by the Ld.PCIT u/s.263 of the Act is, thus, not sustainable and the same is hereby quashed. Printed from counselvise.com ITA No.543/Ahd/2025 Jay Chemical Industries Pvt.Ltd.vs. PCIT, Ahmedabad-1 Astt.Year 2020-21 5 6. In the result, appeal of the assessee stands allowed. Order pronounced in the Open Court on 26 /08/2025. Sd/- Sd/- ( Narendra Prasad Sinha ) Accountant Member ( Sanjay Garg ) Judicial Member अहमदाबाद/Ahmedabad, िदनांक/Dated 26/08/2025 टी.सी.नायर, व.िन.स./T.C. NAIR, Sr. PS आदेश की #ितिलिप अ$ेिषत/Copy of the Order forwarded to : 1. अपीलाथ% / The Appellant 2. #&थ% / The Respondent. 3. संबंिधत आयकर आयु' / Concerned CIT 4. आयकर आयु' ) अपील ( / The PCIT-1, Ahmedabad-1 5. िवभागीय #ितिनिध , अिधकरण अपीलीय आयकर , अहमदाबाद /DR,ITAT, Ahmedabad. 6. गाड\u000f फाईल / Guard file. आदेशानुसार/ BY ORDER, स&ािपत #ित //True Copy// सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण, ITAT, Ahmedabad 1. Date of dictation (dictation pad is attached with the file)) : 25.8.2025 2. Date on which the typed draft is placed before the Dictating Member. : 25.8.2025 3. Date on which the approved draft comes to the Sr.P.S./P.S : 4. Date on which the fair order is placed before the Dictating Member for pronouncement. : 5. Date on which fair order placed before Other Member : 6. Date on which the fair order comes back to the Sr.P.S./P.S. : 26.8.25 7. Date on which the file goes to the Bench Clerk. : 26.8.25 8. Date on which the file goes to the Head Clerk. : 9. The date on which the file goes to the Assistant Registrar for signature on the order. : 10. Date of Despatch of the Order : Printed from counselvise.com "